CEOs at Large State Chartered CEOs Earned 12.5 Times Average Employee Compensation

In 2018, Chief Executive Officers at state chartered credit unions with at least $1 billion in assets earned on average 12.5 times the average compensation of their employees.

The median ratio of CEO compensation to average credit union employee compensation was 10.99.

To calculate average credit union employee compensation, the analysis divided the Call Report line item Employee Compensation & Benefits by Full Time Equivalent Employees. Full Time Equivalent Employees = The Number of Full Time Employees + (0.5 times the Number of Part Time Employees).

The following table lists the 10 credit unions with the highest ratio of CEO compensation to average employee compensation. Elizabeth Dooley of Educational Employees Credit Union (Fresno, CA) had the highest ratio of CEO compensation to average employee compensation at 41.28.

However, this data should not be used to compare the compensation of bank CEOs to their employees. The information reported by publicly-traded banks uses median employee pay, while this analysis substitutes average employee compensation for median compensation, because median compensation is not available.

Median employee compensation would be lower than average employee compensation. In other words, if median compensation was used, the ratio of CEO compensation to median employee compensation would be higher.

Average CEO Compensation at Large State Chartered CUs Tops $1 Million for Fifth Consecutive Year

The average compensation for Chief Executives at large state chartered credit unions with at least $1 billion in assets was $1,030,696 for 2018. This is the fifth consecutive year were the average compensation topped $1 million.

The median total compensation for 2018 was almost $838,372.

Total compensation includes base salary, bonus and incentives, other reportable income, retirement and deferred compensation, and nontaxable benefits.

Compensation information was obtained from Schedule J of Form 990s filed by state chartered credit unions with at least $1 billion in assets.

At the time this blog post was written, Form 990s for 2018 were not available for the following credit unions -- Municipal Credit Union (NY), Canvas Credit Union (CO), Rogue Credit Union (OR), and Cobalt Credit Union (IA).

Self-Help Credit Union (NC) filed a Form 990, but did not publish Schedule J.

Sixty-two CEOs reported total compensation of at least $1 million. The following table lists the 10 highest compensated large state chartered credit union CEOs.

Mean and median base compensation was $552,498 and $525,599, respectively. Seven CEOs had a base pay in excess of $1 million.

Mean and median incentives and bonuses were $172,853 and $118,419, respectively. Most large state chartered CU CEOs received some sort of incentive or bonus compensation.

Compensation information for CEOs at federal credit unions was not available as federal credit unions are not required to file Form 990s.

Corrections and Amplifications:

The Form 990 for Patelco Credit Union had an error. It was reported that Erin Mendez had a total compensation for 2018 of $2,470,580. The corrected total compensation for 2018 was $916,565. The error arose from the inclusion of Mr. Mendez's unvested 457(f) plan.
This blog post had earlier stated that 63 CEOs had total compensation of at least $1 million.
An earlier version reported that the base salary for University of Wisconsin CU's Paul Kundert was $1,915,557, which was the correct amount in Schedule J Part II B(1). However, it has been brought to the attention of this blogger that the narrative for Schedule J Part III included a deferred compensation payment in the amount of $1,317,000 in the $1,915,557 figure. Therefore, his base salary was $598,557.

Federal Credit Unions Should File Form 990s

The Tax Cuts and Jobs Act of 2017 imposed a new 21 percent excise tax on applicable tax-exempt organizations that pay more than $1 million in remuneration to any covered employee for any taxable years beginning after December 31, 2017.

A covered employee is one of the five highest compensated employees for any taxable year beginning after December 31, 2016. Once a person becomes a covered employee, he or she will remain a covered employee for all subsequent tax years regardless of whether the individual continues to be one of the five highest compensated employees by the organization.

Almost all tax-exempt organizations file Form 990s. The Form 990 includes compensation information for senior management at tax-exempt entities.

However, compensation information is not available for federal credit unions; because federal credit unions are not required to file Form 990s.

The Internal Revenue Service (IRS) should require federal credit unions to file Form 990s.

The Form 990 is an important tool for the IRS to monitor and track potential noncompliance with the new excise tax.

It would also allow the public to determine if federal credit unions are providing excess compensation to senior management.

Virginia Bill Would Allow CUs to Pay Board of Directors

A bill (HB813) in the Virginia legislature will permit Virginia state chartered credit unions to pay members of the board of directors and credit and supervisory committees.

The bill would require the board of directors to develop a written policy regarding compensation.

Total annual compensation to individual board or committee members cannot exceed $6,000.

The bill excludes accident, health, and term life insurance for a director or committee member will not be considered compensation.

Also, directors and committee members may be reimbursed for expenses, while on official credit union business.

The bill unanimously passed the Virginia House of Delegates.

Read more.

Article Looks at Pay of CEO at AmeriCU

Syracuse.com is reporting that Mark Pfisterer, CEO of AmeriCU Credit Union (Rome, NY), earned $2.5 million in 2018 after earning $7.97 million in 2017.

The article noted that his 2018 salary was comparable to the salaries paid CEOs at much larger banks in the region. The CEO of $120 billion M&T Bank (Buffalo, NY) was paid $4.77 million in 2018, while the CEO of $9.6 billion NBT Bancorp (Norwich, CT) earned $2.2 million in 2018.

In comparison, AmeriCU had $1.7 billion in assets.

The article also compared his compensation to other tax exempt organizations in upstate New York.

Read more.

Does Your CU Treat Members as Owners?

Credit unions claim that their members are owners.

However, credit union governance practices suggest otherwise.

Federal credit unions are averse to disclosing executive compensation.

Unlike state chartered credit unions, which disclose executive compensation information in individual Form 990s, there is no such requirement for federal credit unions.

However, Robert Hoel in a Filene Research Institute report, Power and Governance: Who Really Owns Credit Unions?, wrote: "Denying credit union owners and the general public executive compensation information in a direct and straightforward manner is difficult to justify objectively. Because transparency is a powerful tool for detecting and preventing insider abuses."

Hoel commented that the National Credit Union Administration "may want to require credit unions to include specific compensation information in call reports and make the information available to credit union members at annual meetings."

In a related matter, credit unions don't give credit union members the ability to have a non-binding say on executive pay, stockholders in publicly traded companies have the right to cast an advisory vote on executive compensation.
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Schools Financial's Merger Notice

Beyond the usual happy talk about how the merger will benefit credit union members, the merger notice of Schools Financial Credit Union (Sacramento, CA) includes information about merger-related compensation and distribution of net worth to members.

Schools Financial Credit Union is proposing to merge with Schoolsfirst Federal Credit Union (Santa Ana, CA).

First, the credit union states that a vote for the merger will result in an up to $4 million special dividend distribution from net worth to the credit union's members. The distribution will take place on a one-time (pro-rata) basis, with individual dividends being calculated based on average month-end deposit balances in the six (6) month period from June 1, 2019 to November 30, 2019.

Second, the notice disclosed the merger-related compensation for five employees of Schools Financial. Tim Marriott, President/CEO of Schools Financial CU, could earn up to a maximum $8,011,532 in merger-related compensation. However, the notice states that the the likely amount of compensation could be significantly lower.

Also, all employees of Schools Financial Credit Union, except Mr. Marriott, are being offered retention bonuses to help ensure a smooth transition and successful integration of the merger.

The date of the member's vote is December 12, 2019.

Merger Notice.

CU CEOs Earned Almost 14 Times the Average Pay of CU Employees

In 2017, chief executive compensation at large state chartered credit unions was on average 13.81 times the average employee salary and benefits.

The median ratio of chief executive compensation to average employee salary and benefits was 10.29.

To calculate average credit union employee compensation, the analysis divided the Call Report line item Employee Compensation & Benefits by Full Time Equivalent Employees. Full Time Equivalent Employees = The Number of Full Time Employees + (0.5 times the Number of Part Time Employees).

A large state chartered credit union had at least $1 billion in assets, as of December 2017.

The CEO with the highest compensation to average employee compensation ratio was Mark Pfisterer of AmeriCU (Rome, NY) at 99.6 times the average employee compensation at AmeriCU.

The following table lists the 10 chief executives with the highest compensation to average employee compensation ratio.

However, this data should not be used to compare the compensation of bank CEOs to their employees. The information reported by publicly-traded banks uses median employee pay, while this analysis substitutes average employee compensation for median compensation, because median compensation is not available.

Median employee compensation would be lower than average employee compensation. In other words, if median compensation was used, the ratio of CEO compensation to median employee compensation would be higher.

Average CEO Compensation at Large State Chartered CUs Was $1.16 Million for 2017

The average total compensation for CEOs at large state chartered credit unions with at least $1 billion in assets was $1.16 million for 2017. This is the fourth consecutive year were the average compensation topped $1 million.

The median total compensation for 2017 was almost $803 thousand.

Total compensation includes base salary, bonus and incentives, other reportable income, retirement and deferred compensation, and nontaxable benefits.

Compensation information was obtained from Form 990s filed by 154 state chartered credit unions with at least $1 billion in assets.

At the time this blog post was being written, Form 990s for 2017 were not available for the following credit unions -- Collins Community Credit Union (IA), CFCU Community Credit Union (NY), Melrose Credit Union (NY), Municipal Credit Union (NY), Public Service Employees Credit Union (CO), and Rogue Credit Union (OR).

Mean and median base compensation was $512,148 and $489,783, respectively. The CEO with the highest base salary was Crystal Long of GECU (El Paso, TX) at $1,680,474.

Mean and median incentives and bonuses were $212,134 and $116,416, respectively. Most large CU CEOs received some sort of incentive or bonus compensation.

The data on base compensation and incentives and bonuses excludes information from Lake Michigan Credit Union (MI), because Lake Michigan CU combined base compensation with bonuses and incentives.

Fifty-eight credit union CEOs earned total compensation of $1 million or more in 2017.

The highest paid CEO was R. Heldebrant of Star One Credit Union (CA) with total compensation of $12,465,866 for 2017.

Update

The Form 990s are now available for Canvas CU, CFCU Community CU, Collins Community CU, and Rogue CU. This information has not been incorporated into the statistical analysis of CEO compensation.

Darryl Marksberry of Canvas CU (CO) had total compensation of $771,721 with base pay of $500,941 and bonus and incentive compensation of $225,000.

Lisa Whitaker of CFCU Community CU (NY) had total compensation of $1,283,914. Base compensation was $498,687 and incentive and bonus compensation was $173,918.

Stephanie Rupert of Collins Community CU (IA) had total compensation of $476,183 with a base pay of $308,653 and incentive and bonus pay of $112,499.

Eugene Pelham of Rogue CU (OR) had total compensation of $940,376. Base pay was $472,885. Bonus and incentive pay was $117,248.

The following table lists the 10 highest paid large state chartered credit union CEOs in 2017.

Below is the list of CEO compensation at state chartered credit unions with at least $1 billion in assets (click on images to enlarge).

Ohio Becomes the Latest State to Allow CUs to Compensate Directors

Legislation (House Bill 489) permits Ohio credit unions to compensate their directors.

The bill was signed into law in March 2019.

The legislation states "A credit union may provide any of the following to its directors and supervisory audit committee members: (1) Reasonable compensation for their service as directors or supervisory audit committee members."

Robert Rutkowski, Deputy Superintendent of the Ohio Division of Financial Institutions, wrote in the Credit Union Newsletter setting the Division's expectations for credit unions deciding to pay their directors.

Credit unions should take asset size and financial conditions into consideration when setting director pay.

Credit unions should also set new standards for director competence and performance as part of the compensation arrangement.

Read the newsletter.

CU CEO Earns Almost $1.9 Million in 2017, Despite Problems with Taxi Medallion Loans

Despite losing almost $97.2 million for 2017, the CEO of Progressive Credit Union (New York, NY) was paid approximately $1.9 million.

The credit union's performance was adversely affected by defaulting taxi medallion loans arising from the disruption of the taxi medallion industry.

Robert Familant, CEO and Treasurer of Progressive Credit Union, had total compensation of $1,931,827 for 2017 with a base compensation of $1,870,722, according to the credit union's Form 990 (click on image to enlarge).

While Familant's compensation was scaled back from almost $2.3 million in 2016, this 2017 pay package seems to deny the reality of depth and scope of the problems facing the credit union.

The credit union had $470.6 million in assets at the end of 2017.

Progressive Credit Union was taken over by Pentagon Federal Credit Union (McLean, VA) via an emergency merger in early 2019.

The Average NCUA Employee Earned More Than $128,000 in 2017

The average pay of National Credit Union Administration (NCUA) employees topped $128 thousand for 2017, according to FederalPay.org.

NCUA's 1,139 employees earned an average of $128,030.72. In 2016, the average NCUA employee earned $121,180.88.

Pay includes base salary plus bonus.

Eighty-six NCUA employees earned in excess of $200,000 with 17 employees earning more than $250,000.

The following table lists the 10 highest paid employees at NCUA.

Credit Union Odds and Ends

The following three credit union tidbits caught my attention. The first deals with the ending of subsidized government office space for a credit union. The second involves a credit union funding a construction loan for $5.36 million. The third item discusses how large executive salaries became the norm at Municipal Credit Union.

No More Taxpayer Subsidized Office Space for a Connecticut Credit Union.

The City of Groton (Connecticut) decided to not renew the lease of Groton Municipal Employees Federal Credit Union.

The credit union operated in the basement of the municipal building and paid $1 per year to the city for the space.

The credit union will move to the Groton Shopping Plaza on Plaza Court and pay market prices for the space.

Read the story.

Technology CU Funds $5.36 Million Construction Loan

Technology Credit Union provided a $5.36 million multi-family construction loan to Panoramic Interests.

The loan will fund the development of a four-story, modular-designed, 22-unit studio apartment building in Berkeley, California.

Each studio apartment will be about 365 square feet and will come completely furnished. The apartments will include nine-foot ceilings, stainless steel energy star appliances, bike storage for residents, high-efficiency lighting, low-flow plumbing fixtures and enhanced indoor air quality.

Read the press release.

Paper: Big Salaries Became the Norm at Municipal Credit Union

The Chief wrote that the large compensation packages have become the norm at scandal-plagued Municipal Credit Union (New York, NY).

Beside almost $6 million in 2016 compensation to Municipal's former CEO Kam Wong, who has been accused of embezzling funds from the credit union and banned by the National Credit Union Administration from further participation in the affairs of any credit union, the story noted 3 other employees had total 2016 compensation in excess of $600,000 and another 3 employees earned in excess of $500,000.

Click here for the credit union's 2016 Form 990.

Op-Ed: Larger CUs Should Be Subject to Same Regulations as Banks

In an American Banker op-ed, Aaron Klein, a fellow at the Brookings Institution and policy director at the Center on Regulation and Markets, calls for banklike credit unions to be subject to the same regulations as banks.

Klein stated there is a handful of large credit unions that "want to grow into national financial institutions, serving anyone and everyone."

Klein identifies Pentagon Federal Credit Union (PenFed) with its aggressive growth strategy as the poster child of these mega credit unions.

The op-ed noted that anyone can join PenFed, which contradicts the concept of common bond.

Klein wrote: "If anyone can be part of your field of membership, then you should have a duty to adequately serve everyone."

Klein called on the National Credit Union Administration to require the largest credit unions comply with Community Reinvestment Act to ensure they remain committed to their missions and communities, not cherry-picking high-dollar customers.

He also called for disclosure of credit unions’ executive salaries, as nearly every other nonprofit organization is required to do.

Read the BankThink opinion.

Large CU Executive Pay Was 13 Times Higher Than Average CU Employee Pay

In 2016, chief executive compensation at large state chartered credit unions was on average 13.12 times the average employee salary and benefits in 2016.

The median ratio of chief executive compensation to average employee salary and benefits was 10.22.

To calculate average credit union employee compensation, the analysis divided the Call Report line item Employee Compensation & Benefits by Full Time Equivalent Employees. Full Time Equivalent Employees = The Number of Full Time Employees + (0.5 times the Number of Part Time Employees).

A large state chartered credit union had at least $1 billion in assets.

Premier America Credit Union (Chatsworth, CA) reported the highest ratio of CEO pay to average employee pay at 79.41. The next highest ratio was 66.11 for OnPoint Community Credit Union (Portland, OR). The following chart lists the 10 credit unions with the highest ratio of CEO compensation to average employee salary and benefits.

However, this comparison is not comparable to data being reported by publicly traded companies, which compares CEO pay to median employee pay. It is likely that the ratio for chief executive compensation to average employee pay for large state chartered credit unions is understated, because the analysis uses average employee pay, as median employee pay is not available. The median of employee compensation will be typically lower than the average employee compensation.

Average Chief Executive Compensation at Large State Chartered CUs Tops $1 Million in 2016

Chief executives of state chartered credit unions with at least $1 billion in assets earned on average $1.051 million in total compensation in 2016.

Median compensation in 2016 was $784,360.

This is the third consecutive year in which average chief executive pay topped $1 million.

There were 155 state chartered credit unions with $1 billion or more in assets at the end of 2016. Compensation information was obtained for all but one credit union, DFCU Financial CU (Dearborn, MI).

Compensation data are pulled from Schedule J of Form 990s filed by state chartered credit unions.

Federal credit unions are currently exempt from filing Form 990s and the National Credit Union Administration has not acted upon recommendations to require federal credit unions to disclose senior management compensation.

Total compensation includes base salary, bonus and incentives, other reportable income, retirement and deferred compensation, and nontaxable benefits.

Fifty-three credit union executives reported total compensation of at least $1 million.

Base compensation averaged $485,308. Median base compensation was $475,703. The following graph looks at base pay with respect to asset size.

One hundred thirty-nine executives received bonus and incentive compensation in 2016. For these 139 executives, the average bonus compensation was $185,907 with a median compensation of $133,360. The following graph examines the relationship between bonus and incentive pay and asset size.

Below is information on compensation for chief executives at state chartered credit unions with at least $1 billion in assets (click on image to enlarge).

Update: an earlier version of this post stated that Lake Michigan Credit Union did not disclose the compensation information for Sandy Jelinski. The credit union in an e-mail reconsidered its position to not disclose this information. Here is the information provided. Base and bonus compensation was $1,638,000, other compensation was $42,735.20, and deferred compensation was $49,950.00.

NCUA to Sen. Hatch: CUs Would Need a Taxpayer Bailout, If Taxed

In a March 28 letter to Senator Hatch (R - UT), National Credit Union Administration (NCUA) Chairman McWatters wrote that that eliminating the credit union tax exemption without addressing the remaining regulatory differences between banks and credit unions “would almost certainly have a detrimental effect on the credit union system and increase losses to the Share Insurance Fund, which could ultimately fall to U.S. taxpayers.”

The letter was in response to Senator Hatch's January 31 letter expressing concerns that credit unions may be operating beyond their tax-exempt purpose.

According to McWatters' letter, NCUA's analysis found that "without eliminating the field of membership restrictions, member business lending restrictions, investment capital restrictions, investment authority restrictions, and other restrictions", the elimination of the tax exemption would almost certainly create safety and soundness issues.

McWatters also mentioned that if credit unions were taxed, they "would need an appropriate transition period to incorporate any such changes into their business model" and credit unions should have the option of "something akin to an S corporation election."

However, the letter does not include any details from the agency's analysis.

In response to questions regarding what data the agency has on rejected associational common bonds and community charters, NCUA wrote that it has denied or deferred less than 10 percent of applications for new associational common bonds since its updated associational common bond rule became effective in 2015. The agency stated that it has approved nearly 80 percent of its applications with another 10 percent of applications pending.

“Instead of outright denial, the NCUA typically defers action on requests the agency cannot approve and, to the extent reasonably possible, offers alternative solutions consistent with the FCUA and the agency’s regulatory framework,” McWatters noted.

In response to a question from Hatch about the proposed community charter expansions that NCUA rejects, McWatters said that “NCUA’s tracking system does not distinguish between denials based on the geographic area requested as opposed to other reasons, such as safety and soundness,” thus limiting the agency’s ability to discern where credit unions are pushing field of membership boundaries.

With regard to the disclosure of executive compensation, NCUA noted in 2010 it required corporate credit unions to disclose executive compensation. In 2011, NCUA finalized a regulation eliminating most golden-parachute arrangements for troubled credit unions.

Unfortunately, NCUA has not acted on a staff recommendation to require all federal credit unions to disclose executive compensation.

Read NCUA's letter to Senator Hatch.

Significant Jump in Compensation Wiped Out Merger Target's Net Worth

The net worth of NARC Federal Credit Union (Beltsville, MD) was wiped out prior to its merger to Agriculture Federal Credit Union (Washington, D.C.) by a significant increase in employee compensation.

On October 1, 2017 Agriculture Federal Credit Union acquired NARC Federal Credit Union.

At the end of the third quarter of 2017, NARC FCU was critically undercapitalized with total net worth of negative $623,577. However, the prior quarter the credit union's net worth was $1,565,677.

The dramatic decrease in the credit union's net worth was driven by a material increase in employee compensation and benefits.

NARC FCU reported $2,237,817 in employee compensation and benefits as of September 30, 2017. This was a 10-fold increase in total compensation from a year earlier of $201,594.

NARC had 3 full-time employees. It appears that at least one NARC FCU employee was richly rewarded from this merger.

A Freedom of Information Act request was filed with the National Credit Union Administration seeking documents associated with this merger.
However, some information in this merger package was redacted, making it impossible to determine if compensation arrangements were part of the merger.

CUNA Letter Fails to Address Non-Disclosure of Executive Pay at FCUs

A letter by the Credit Union National Association (CUNA) to Senator Hatch (R - UT) fails to address why federal credit unions should not be required to disclose senior executive compensation. The letter also discusssd how credit unions have evolved over time.

CUNA wrote Senator Hatch on February 6 in response to Senator Hatch's January 31 letter to National Credit Union Administration (NCUA). See my January 31 blog post on Senator Hatch's letter.

Senator Hatch noted that federal credit unions, unlike most tax-exempt organizations, do not file an informational return with the Internal Revenue Service, which includes information on senior management compensation. Senator Hatch wrote that in 2006, the Government Accountability Office (GAO) recommended that the NCUA require federal credit unions to disclose senior executive compensation; but NCUA failed to implement this recommendation. Hatch pointed out that such disclosures would ensure that federal credit unions were a good steward of their tax benefit. In other words, the taxpayer subsidy is not being diverted to excessive pay but rather towards the public policy mission of credit unions.

But CUNA's letter does not directly address the topic of disclosure of executive pay (see page 2 of the letter -- link below).

Instead CUNA states that credit unions need to be able to attract and retain quality talent. Further, credit unions, unlike publicly-traded banks, cannot issue stock or stock options as part of their executive compensation packages. Therefore, when evaluating executive compensations packages, these factors should be taken into consideration.

Additionally, CUNA states that executive pay is determined by credit union boards, who are accountable to the members, and that credit unions are closely supervised and examined by federal and state regulators.

However, if credit union boards were accountable to their members, then NCUA would not have proposed a rule requiring merger-related compensation to be disclosed to members.

CUNA's letter failed to provide a cogent argument as to why federal credit unions should not be required to disclose executive compensation.

Read the letter.

Many Merger Targets Posted Material Jump in Compensation Prior to Merger.

A number of credit unions that were merger targets in recent years reported a material increase in year-over-year quarterly salaries and benefits before their mergers were completed.

Looking at mergers completed between the third quarter of 2014 and third quarter of 2017, 189 credit unions reported at least a 15 percent year-over-year increase in quarterly salaries and benefits. The salary and benefit information is from the quarter or two quarters before the mergers were completed.

Fifty-nine credit unions reported at least a doubling in salaries and benefits.

Below are several examples of material increases in compensation prior to the completion of the merger.

American Federal Credit Union (Mission Hills, CA), which was merged into NuVision on April 1, 2017, reported an 845 percent increase in salaries and benefits at the end of the first quarter of 2017 compared to a year earlier. This material increase in compensation caused the credit union to post a loss of $735,526,

Newport Beach City Employees (Newport Beach, CA), which was acquired by the Credit Union of Southern California on August 7, 2015, reported an 815 percent increase in quarterly salaries and benefits at the end of 2014 compared to the year earlier. The quarterly payment of almost $1.2 million wiped out the credit union's net worth. The last call report filed by the credit union reported a net worth ratio of minus 8.68 percent.

Star Harbor (Rancho Dominique, CA) reported a year-over-year quarterly jump in salaries and benefits of 747 percent. The credit union merged with Financial Partners Credit Union on August 1, 2017. Due to the material increase in salaries and benefits, the credit union on its last call report posted a mid-year loss of $530,552.

Focal Point Federal Credit Union (Syracuse, NY) merged with Empower Federal Credit Union on January 1, 2016. The credit union reported a 424 percent increase in quarterly compensation in the fourth quarter of 2015 compared to the fourth quarter of 2014. The increase in compensation contributed to a loss of approximately $2 million for the fourth quarter of 2015.